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A guide to conducting performance audits
The ANAO’s performance audit activities involve the independent and objective assessment of all or part of an entity’s operations and administrative support systems. This guide outlines the ANAO's approach to performance auditing and includes information about how subjects are identified for audit and the phases of the performance audit process.
The Auditor-General Act 1997 (the Act) sets out the functions, mandate and powers of the Auditor-General for Australia and establishes the statutory office of the Auditor-General and the Australian National Audit Office (ANAO).
The Auditor-General is an independent officer of the Australian Parliament and has discretion in the performance or exercise of their functions or powers. In particular, the Auditor-General is not subject to direction in relation to: whether or not a particular audit is to be conducted; the way in which a particular audit is to be conducted; or the priority to be given to any particular matter. The Auditor-General must, however, have regard to the audit priorities of the Parliament, as determined by the Joint Committee of Public Accounts and Audit (JCPAA).
In delivering against this mandate, the Auditor-General is assisted by the ANAO. Audits undertaken by the ANAO are designed to provide a reasonable level of assurance; the ANAO’s work is governed by auditing standards established by the Auditor-General, which incorporate the standards made by the Auditing and Assurance Standards Board applied by the auditing profession in Australia.
The ANAO’s audit reports are tabled in the Australian Parliament and assist the Parliament in fulfilling its accountability role. Following tabling of an audit report, the ANAO may brief Parliamentary Committees, Ministers and individual Parliamentarians on the findings of the audit.
The JCPAA reviews all performance audit reports and conducts an inquiry on selected reports. Other committees of the Parliament may also choose to conduct inquiries using ANAO reports as key information sources.
The ANAO website provides information on the ANAO audit work program. The website shows the status of all audits included in the work program and invites members of the public to contribute during the evidence gathering phase of each audit. Once an audit is tabled, it is publicly available and can be accessed via the website.
The ANAO’s performance audit activities
The ANAO’s performance audit activities involve the independent and objective assessment of all or part of an entity’s operations and administrative support systems. Performance audits may involve multiple entities and examine common aspects of administration or the joint administration of a program or service.
Through this activity, the ANAO reports to the Parliament on areas where improvements can be made to aspects of public administration and makes specific recommendations to assist public sector entities to improve performance. The audits can include consideration of:
- economy (minimising cost);
- efficiency (maximising the ratio of outputs to inputs);
- effectiveness (the extent to which intended outcomes were achieved); and
- legislative and policy compliance.
The ANAO does not have a role in commenting on the merits of government policy.
The Act authorises the Auditor-General to conduct performance audits, assurance reviews or audits of the performance measures of Commonwealth entities, Commonwealth companies and their subsidiaries.1 The Act also authorises the Auditor-General to conduct a performance audit of a Commonwealth partner.2 Audits of Commonwealth partners that are part of, or controlled by, state or territory governments must be requested by the responsible minister or the JCPAA.
The ANAO identifies subjects for audits through its planning processes and as part of developing the ANAO annual Audit Work Program. The audit program aims to provide broad coverage of areas of public administration while balancing identified priorities with the ANAO’s capacity.
Topics are identified based on consideration of potential benefits; the level of public and parliamentary interest in a topic; and risks to reputation and service delivery. The priorities of the Parliament, as determined through the JCPAA, are a key consideration in this process. Australian Government entities are also consulted and where appropriate, consultation also takes place with State and Territory First Minister’s Departments and Auditors-General. Each performance audit has a specified objective which is approved by the ANAO Executive and advised to the entity and other relevant parties at the outset of the audit.
The performance audit process
Performance audits by their nature involve engagement between the ANAO and the audited entity as well as other stakeholders involved in the program or activity being audited.
The Auditor-General has wide information-gathering powers that provide access to information and premises (see sections 30 to 35 of the Act). The Act provides the Auditor-General or an authorised official with access to Commonwealth premises or premises of a Commonwealth partner, and full and free access to documents and other property. Such material can include Cabinet papers, ministerial decisions, commercially sensitive and classified documents or data, and emails.
Each entity or body is required to provide the ANAO with full and free access at all reasonable times to any premises, documents or other property that it may wish to examine, and make copies of or take extracts from any document, in accordance with section 33 of the Act.
What you can expect from the ANAO
To facilitate the audit process and ensure that reports are accurate, balanced and fair the audit team will conduct the audit in accordance with the following expectations:
Professionalism – audit teams will perform their role objectively and with impartiality. We will comply with the ANAO auditing standards and uphold the Australian Public Service values as set out in the Public Service Act 1999.
Evidence-based – audit teams will obtain sufficient knowledge of each entity and an understanding of the issues relevant to the administration of the activity being audited.
No surprises – the ANAO seeks to ensure communication throughout the audit such that there are ‘no surprises’ in the final audit report. This approach provides opportunities for entities and other parties to discuss the audit findings during the course of the audit.
Confidentiality – the ANAO treats all audit-related information as ‘in-confidence’.3 Sensitive information that in the Auditor-General’s opinion is not in the public interest will not be included in public reports.4
Security – the information obtained during the audit will be stored securely at all times and used only for audit purposes. The ANAO computer network has a protected security rating and arrangements are in place to store documents with higher security classifications. ANAO staff have appropriate clearances.
The main phases of a performance audit involve audit planning, evidence gathering and analysis, and reporting.
The first phase of the audit process involves planning the audit, including defining the audit objective5, scope and audit criteria. This phase generally involves a brief review of information relating to the program or activity to be audited, and consultation with the relevant entities and stakeholders.
Once the audit has been approved by the ANAO Executive, the audited entity and other key stakeholders are formally designated as part of the audit. An entry interview is arranged with senior officials of these entities to discuss the audit scope and objective, and to formally commence the audit activities, including setting out the schedule for the audit and the ANAO’s information requirements.
Evidence gathering and analysis
In the second phase of the audit, the ANAO gathers and analyses the evidence necessary for it to draw a conclusion on the audit objective. This will include gathering documentation and conducting meetings with managers and staff from the audited entity as well as from other stakeholders relevant to the audit topic. The ANAO may also conduct on-site visits to inspect work being undertaken and to verify and examine physical assets.
What we require from audited entities
The conduct of an audit is facilitated when the entity or body provide all reasonable facilities and assistance to aid the conduct of an audit, including:
Access – providing the ANAO with access to any premises, systems, documents and other property that may be necessary to the audit.
Responsiveness – responding in a reasonable timeframe to requests for access to relevant staff, facilities, documentation and information. The ANAO requires requests for access and information to be responded to within one week of being made.
Electronic data – consistent with the Government’s Digital Transition Policy, all requested records are to be made available to the ANAO electronically.
Confidentiality – recipients of an ANAO draft or proposed audit report must not disclose any of the information in the report, or extract, except with the consent of the Auditor-General.6
Feedback – concerns or issues in relation to the audit should be raised with the audit team or appropriate ANAO representative in a timely manner. The ANAO will also seek feedback on the conduct of audits at the conclusion of the audit.
Once documentation and evidence has been gathered and analysed, the ANAO will outline the preliminary audit findings, conclusions and potential audit recommendations. This information is provided to the audited entity for review and feedback, including to correct errors of fact, and where necessary, to allow for provision of additional information and context.
In some circumstances, it may not be appropriate to provide every stakeholder with this information and some entities may be provided with extracts that relate specifically to their involvement in the activity being audited. An exit interview will generally be held with senior managers of the entities involved in the audit to discuss the audit findings, conclusions and potential recommendations and to finalise this phase of work.
After considering the response to the preliminary audit findings, the ANAO drafts the proposed audit report. The proposed report or extracts of the report are provided to the audited entity and any other parties that the Auditor-General considers have a special interest in the proposed report.
All written comments received within 28 days of the proposed report being provided for review, are considered in preparing the final audit report. All formal comments received within 28 days are included in the final report.
All reports are tabled in the Parliament as soon as practicable after completion. Two days prior to the report being tabled in the Parliament, a final draft of the report is provided to: the relevant Minister; the Accountable Authority of the entity subject to audit; and others who the Auditor-General considers have a special interest in the report.7 Following the tabling of an audit report, audit reports are publicly available and can be accessed from the ANAO’s website.
Once tabled, audit reports attract Parliamentary privilege. Draft reports and working papers prepared by the ANAO as part of the conduct of a performance audit also attract Parliamentary privilege.
1 The Auditor-General may only conduct a performance audit of a government business enterprise if the JCPAA requests the audit.
2 Commonwealth partners include contractors and state and territory bodies that have received money to achieve a Commonwealth purpose and have agreed to use the money in achieving that purpose or have entered into a contract that relates to that purpose.
3 The Act provides that any person who obtains information in the course of performing an Auditor-General function must not disclose the information obtained, except in the course of performing an Auditor-General function, or for the purpose of any Act that gives functions to the Auditor-General (see section 36 of the Act).
4 In accordance with section 37 of the Act.
5 In the case of a Commonwealth partner audit under section 18B of the Act, the general objective of the audit may also be indicated in the JCPAA’s request for the audit.
6 The Auditor-General provides entities or bodies with consent to disclose information to staff of the entity or body that can assist the entity in providing comments on the report or extract.
7 These drafts are provided on a strictly confidential basis and the content of the reports must not be disclosed prior to tabling of the final audit report in Parliament.